UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to ________________________
Commission file number 0-20164
Krupp Government Income Trust II
(Exact name of registrant as specified in its charter)
Massachusetts 04-3073045
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Beacon Street, Boston, Massachusetts 02108
(Address of principal executive offices) (Zip Code)
(617) 523-0066
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No |_|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|
SEC 1296 (03-05) Potential persons who are to respond to the collection of
information contained in this form are not required to respond
unless the form displays a currently valid OMB control number.
-1-
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
This Form 10-Q contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. When used in this Form 10-Q, the words "believes," "anticipates,"
"expects," "plans," "intends," "estimates," "continue," "may" or "will" (or the
negative of such words) and similar expressions are intended to identify
forward-looking statements. Such statements are subject to a number of risks and
uncertainties, including but not limited to the following: federal, state or
local regulations; adverse changes in general economic or local conditions;
pre-payments of mortgages; failure of borrowers to pay participation interests
due to poor operating results of properties underlying the mortgages; uninsured
losses and potential conflicts of interest between the Trust and its Affiliates,
including the Trustees. The Company's filings with the Securities and Exchange
Commission, including its Annual Report on Form 10-K for the year ended December
31, 2004, contain additional information concerning such risk factors. Actual
results in the future could differ materially from those described in any
forward-looking statements as a result of the risk factors set forth above, and
the risk factors described in the Annual Report.
The Trust has used forward-looking statements in a number of places in this Form
10-Q, including, without limitation, "ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION" and "ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK." The risks and
uncertainties described within these sections include, without limitation, those
related to investments in real estate; status as a real estate investment trust
("REIT"); capital expenditures and requirements; corporate structure; debt and
liquidity needs; federal, state or local regulations; adverse changes in general
economic or local conditions; the inability of borrowers to meet financial
obligations on additional loans; pre-payments of mortgages; failure of borrowers
to pay participation interests due to poor operating results at properties
underlying the mortgages; and uninsured losses and potential conflicts of
interest between the Trust and its affiliates, including the Berkshire Mortgage
Advisors Limited Partnership (the "Advisor"). The Trust has discussed these
risks and uncertainties in detail within these sections.
Given the risks and uncertainties, you are cautioned not to place undue reliance
on the forward-looking statements that may be made in this Form 10-Q. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or other
changes.
-2-
KRUPP GOVERNMENT INCOME TRUST II
BALANCE SHEETS
ASSETS
March 31, December 31,
2005 2004
------------- -------------
Participating Insured Mortgage Investments
("PIMIs")(Note 2):
Insured mortgages $ 16,249,154 $ 25,889,150
Additional Loans 4,600,000 6,880,000
Mortgage-Backed Securities ("MBS")(Note 3) 2,453,246 2,655,606
------------- -------------
Total mortgage investments 23,302,400 35,424,756
Cash and cash equivalents 4,403,356 4,187,417
Due from affiliates (Note 4) -- 170,944
Interest receivable and other assets 144,884 341,285
Prepaid acquisition fees and expenses, net of
accumulated amortization of $1,585,804 and
$1,545,490, respectively 26,876 67,190
Prepaid participation servicing fees, net of
accumulated amortization of $528,601 and
$515,163, respectively 8,959 22,397
------------- -------------
Total assets $ 27,886,475 $ 40,213,989
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities $ 514,908 $ 218,670
------------- -------------
Shareholders' equity (Note 5):
Common stock, no par value; 25,000,000
Shares authorized; 18,371,477 Shares
issued and outstanding 27,270,654 39,856,656
Accumulated comprehensive income 100,913 138,663
------------- -------------
Total Shareholders' equity 27,371,567 39,995,319
------------- -------------
Total liabilities and Shareholders' equity $ 27,886,475 $ 40,213,989
============= =============
The accompanying notes are an integral
part of the financial statements.
-3-
KRUPP GOVERNMENT INCOME TRUST II
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
--------------------------
For the Three Months
Ended March 31,
---------------------------------
2005 2004
------------- -------------
Revenues:
Interest income - PIMs and PIMIs:
Basic interest $ 380,979 $ 581,093
Additional Loan interest 107,100 120,400
Participation interest 1,720,525 136,494
Interest income - MBS 43,762 50,962
Interest income - cash and cash equivalents 27,385 11,901
------------- -------------
Total revenues 2,279,751 900,850
------------- -------------
Expenses:
Asset management fee to an affiliate 57,300 82,878
Expense reimbursements to affiliates 191,191 111,729
Amortization of prepaid fees and expenses 53,752 71,038
General and administrative 50,043 86,401
------------- -------------
Total expenses 352,286 352,046
------------- -------------
Net income 1,927,465 548,804
Other comprehensive income:
Net increase (decrease) in unrealized gain on MBS (37,750) 74,968
------------- -------------
Total comprehensive income $ 1,889,715 $ 623,772
============= =============
Basic earnings per Share $ .10 $ .03
============= =============
Weighted average Shares outstanding 18,371,477 18,371,477
============= =============
The accompanying notes are an integral
part of the financial statements.
-4-
KRUPP GOVERNMENT INCOME TRUST II
STATEMENTS OF CASH FLOWS
--------------------------
For the Three Months
Ended March 31,
---------------------------------
2005 2004
------------- -------------
Operating activities:
Net income $ 1,927,465 $ 548,804
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of net premium 2,982 14,223
Amortization of prepaid fees and expenses 53,752 71,038
Changes in assets and liabilities:
Decrease in interest receivable and other assets 196,401 127,454
Decrease in due from affiliates 170,944 --
Increase (decrease) in liabilities 296,238 (93,821)
------------- -------------
Net cash provided by operating activities 2,647,782 667,698
------------- -------------
Investing activities:
Principal collections on MBS 161,628 457,859
Principal collections on Additional Loans 2,280,000 --
Principal collections on PIMs and Insured Mortgages 9,639,996 140,378
------------- -------------
Net cash provided by investing activities 12,081,624 598,237
------------- -------------
Financing activity:
Dividends (14,513,467) (2,572,007)
------------- -------------
Net (decrease) increase in cash and cash equivalents 215,939 (1,306,072)
Cash and cash equivalents, beginning of period 4,187,417 5,454,067
------------- -------------
Cash and cash equivalents, end of period $ 4,403,356 $ 4,147,995
============= =============
Non cash activities:
Increase (decrease) in unrealized gain on MBS $ (37,750) $ 74,968
============= =============
The accompanying notes are an integral
part of the financial statements.
-5-
KRUPP GOVERNMENT INCOME TRUST II
NOTES TO FINANCIAL STATEMENTS
--------------------------
1. Accounting Policies
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted in this report on Form 10-Q pursuant to the Rules and Regulations
of the Securities and Exchange Commission. However, in the opinion of
Berkshire Mortgage Advisors Limited Partnership (the "Advisor"), which is
the advisor to Krupp Government Income Trust II (the "Trust"), the
disclosures contained in this report are adequate to make the information
presented not misleading. See Notes to Financial Statements in the Trust's
Form 10-K for the year ended December 31, 2004 for additional information
relevant to significant accounting policies followed by the Trust.
In the opinion of the Advisor of the Trust, the accompanying unaudited
financial statements reflect all adjustments (consisting primarily of
normal recurring accruals) necessary to present fairly the Trust's
financial position as of March 31, 2005, its results of operations for the
three months ended March 31, 2005 and 2004, and its cash flows for the
three months ended March 31, 2005 and 2004.
The results of operations for the three months ended March 31, 2005 are
not necessarily indicative of the results which may be expected for the
full year. See Management's Discussion and Analysis of Financial Condition
and Results of Operations included in this report.
2. PIMIs
At March 31, 2005, the Trust's remaining PIMI, including the Additional
Loan, had a fair value of $21,742,858 and gross unrealized gains of
$893,703. Fair value assumes that the insured first mortgage of the Fannie
Mae MBS portion of the remaining PIMI could be sold at prices equal to the
amounts being realized by MBS with similar interest rates. Fair value
includes the current carrying value of the Additional Loans. Fair value
does not include any value for the participation features. The remaining
PIMI will mature in 2010. At March 31, 2005 the remaining PIMI within the
Trust's portfolio was not delinquent as to principal or interest.
In 2005, the Trust received a prepayment of the Martin's Landing
Apartments PIMI and the Additional Loan note. On March 1, 2005 the Trust
received $2,280,000 of Additional Loan principal and received $1,742,959
of interest, which included $1,639,221 of Participating Appreciation
Interest, $79,800 of unpaid Additional Loan interest and $23,938 of
Participating Income Interest. On March 25, 2005, the Trust received a
prepayment of the Martin's Landing Apartments PIMI for $9,575,484. On
March 31, 2005, the Trust paid a special dividend of $0.74 per share for
the proceeds received.
3. MBS
At March 31, 2005 the Trust's MBS portfolio had an amortized cost of
$2,352,333 and gross unrealized gains of $100,913. The MBS portfolio has
maturities ranging from 2008 to 2031.
4. Operating Expense Limitation
Per Article VI, Section 5 of the Declaration of Trust, the total annual
operating expenses of the Trust may not exceed the greater of 2% of the
average invested assets of the Trust or 25% of the Trust's net income.
These tests are calculated each quarter by the Advisor based on the prior
twelve months of activity. In order for the Trust to be in compliance with
this requirement, the Advisor refunded $170,944 of the Trust's operating
expenses for the twelve months ended September 30, 2004 on February 23,
2005.
Continued
-6-
KRUPP GOVERNMENT INCOME TRUST II
NOTES TO FINANCIAL STATEMENTS, Continued
--------------------------
5. Changes in Shareholders' Equity
A summary of changes in Shareholders' equity for the three months ended
March 31, 2005 is as follows:
Accumulated Total
Common Retained Comprehensive Shareholders'
Stock Earnings Income Equity
------------ ------------ ------------ -------------
Balance at December 31, 2004 $ 39,856,656 $ -- $ 138,663 $ 39,995,319
Net income -- 1,927,465 -- 1,927,465
Dividends (12,586,002) (1,927,465) -- (14,513,467)
Change in unrealized gain on MBS -- -- (37,750) (37,750)
------------ ------------ ------------ ------------
Balance at March 31, 2005 $ 27,270,654 $ -- $ 100,913 $ 27,371,567
============ ============ ============ ============
-7-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
financial statements and accompanying notes contained in the Trust's 2004 Annual
Report on Form 10-K and in this report on Form 10-Q.
Certain statements in this Management's Discussion and Analysis of Financial
Condition and Results of Operations and elsewhere in this report on Form 10-Q
constitute "forward-looking statements" within the meaning of the Federal
Private Securities Litigation Reform Act of 1995. These forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the Trust's actual results, performance or achievements to be
materially different from any future results, performance or achievements
expressed or implied by these forward-looking statements. These factors include,
among other things, federal, state or local regulations; adverse changes in
general economic or local conditions; the inability of the borrower to meet
financial obligations on Additional Loans; pre-payments of mortgages; failure of
borrowers to pay participation interests due to poor operating results at
properties underlying the mortgages; uninsured losses and potential conflicts of
interest between the Trust and its Affiliates, including the Advisor.
Liquidity and Capital Resources
At March 31, 2005 the Trust had liquidity consisting of cash and cash
equivalents of approximately $4.4 million, as well as the cash inflows provided
by the remaining PIMI, MBS and cash and cash equivalents. The Trust may also
receive additional cash flow from the participation features of its remaining
PIMI. The Trust anticipates that these sources will be adequate to provide the
Trust with sufficient liquidity to meet its obligations, including providing
dividends to its investors.
The most significant demand on the Trust's liquidity is the quarterly dividend
paid to investors of approximately $919,000, which represents the current
quarterly dividend rate of $0.05 per share. Dividends are funded by interest
income received on the remaining PIMIs, MBS and cash and cash equivalents, net
of operating expenses, and the principal collections received on its remaining
PIMIs and MBS. The portion of dividends funded from principal collections
reduces the capital resources of the Trust. As the capital resources of the
Trust decrease, the total cash flows to the Trust will also decrease which may
result in periodic adjustments to the dividends paid to the investors.
The Advisor periodically reviews the dividend rate to determine whether an
adjustment is necessary based on projected future cash flows. The current
dividend rate is $0.05 per share per quarter. The Trustees, based on the
Advisor's recommendations, generally set a dividend rate that provides for level
quarterly distributions. To the extent quarterly dividends do not fully utilize
the cash available for distribution and cash balances increase, the Trustees may
adjust the dividend rate or distribute such funds through a special dividend.
In addition to providing guaranteed or insured monthly principal and interest
payments from the insured first mortgage or Fannie Mae MBS portion of a PIMI,
the Trust's investments in the remaining PIMI also may provide additional income
through the interest on the Additional Loan portion of the PIMI as well as
participation interest based on operating cash flow and increase in the value
realized upon the sale or refinance of the underlying properties. However, these
payments and collection of the Additional Loan principal are neither guaranteed
nor insured and depend on the successful operations of the underlying
properties.
Through the three months ended March 31, 2005, the Trust received the first
installment of Additional Loan interest due in 2005 from its remaining PIMI
investments.
The Trust received participation interest based on cash flow generated by
property operations from two of its investments during the three months ended
March 31, 2005. The Lakes paid $57,366, and in addition, the Trust received and
recognized participation interest related to the Martin's Landing Additional
Loan payoff (see below).
In 2005, the Trust received a prepayment of the Martin's Landing Apartments PIMI
and the Additional Loan note. On March 1, 2005 the Trust received $2,280,000 of
Additional Loan principal and received $1,742,959 of interest, which included
$1,639,221 of Participating Appreciation Interest, $79,800 of unpaid Additional
Loan interest and $23,938 of Participating Income Interest. On March 25, 2005,
the Trust received a prepayment of the Martin's Landing Apartments PIMI for
$9,575,484. On March 31, 2005, the Trust paid a special dividend of $0.74 per
share for the proceeds received.
Whether the operating performance of any of the remaining properties will
provide sufficient cash flow from operations to pay either the Additional Loan
interest or participation interest will depend on factors that the Trust has
minimal control over. Should the properties be unable to generate sufficient
cash flow to pay the Additional Loan interest, it would reduce the Trust's
distributable cash flow and could affect the value of the Additional Loan
collateral.
-8-
There are contractual restrictions on the prepayment of the remaining PIMI.
During the first five years of the investment, borrowers are generally
prohibited from repayment. During the second five years, the PIMI borrowers can
prepay the insured or guaranteed mortgage and the Additional Loan by satisfying
the Preferred Return obligation. The participation features and the Additional
Loan are neither insured nor guaranteed. If the prepayment of the remaining PIMI
results from the foreclosure on the underlying property, an insurance claim or
under a guarantee, the Trust generally would not receive any participation
interest or any amounts due under the Additional Loan. At this time, the Trust
does not expect the remaining PIMI to be subject to any foreclosure action or an
insurance or guarantee claim.
The Trust will have the option to call the remaining PIMI during 2005 for an
accelerated maturity in 2006 in accordance with the loan documents. The Advisor
will determine the merits of exercising the call option for the remaining PIMI
as economic conditions warrant. Such factors as the condition of the asset,
local market conditions, the interest rate environment and available financing
will have an impact on these decisions.
Critical Accounting Policies
The Trust's critical accounting policies relate to revenue recognition related
to the Trust's PIMI investments, impaired mortgage loans, amortization of
Prepaid Fees and Expenses and the carrying value of its MBS. The Trust's
policies are as follows:
The Trust accounts for its MBS portion of a PIMI investment in accordance with
the Financial Accounting Standards Board's Statement 115, "Accounting for
Certain Investments in Debt and Equity Securities" ("FAS 115"), under the
classification of held to maturity as these investments have a participation
feature. As a result, the Trust would not sell or otherwise dispose of the MBS.
Accordingly, the Trust has both the intention and ability to hold these
investments to expected maturity. The Trust carries these MBS at amortized cost.
The insured mortgage portion of the Federal Housing Administration ("FHA") PIMI
is carried at amortized cost. The Trust holds these mortgages at amortized cost
since they are fully insured by the FHA. The Additional Loans are carried at
amortized cost unless the Advisor believes there is an impairment in value, in
which case a valuation allowance is established in accordance with FAS 114
"Accounting by Creditors for Impairment of a Loan" and FAS 118 "Accounting by
Creditors for Impairment of a Loan-Income Recognition and Disclosures". The
Trust, in accordance with FAS 115, classifies its MBS portfolio as
available-for-sale. The Trust classifies its MBS portfolio as available-for-sale
as a portion of the MBS portfolio may remain after all of the PIMs and PIMIs
payoff and it will then be necessary to sell the remaining MBS portfolio in
order to close out the Trust. In addition, other situations such as liquidity
needs could arise which would necessitate the sale of a portion of the MBS
portfolio. The Trust carries its MBS at fair market value and reflects any
unrealized gains (losses) as a separate component of Shareholders' Equity. The
Trust amortizes purchase premiums or discounts over the life of the underlying
mortgages using the effective interest method.
Basic interest is recognized based on the stated rate of the Department of
Housing and Urban Development ("HUD") Insured Mortgage loan (less the servicer's
fee) or the coupon rate of the Fannie Mae MBS. The Trust recognizes interest
related to the participation features when the amount becomes fixed and the
transaction that gives rise to such amount is finalized, cash is received and
all contingencies are resolved. This could be the sale or refinancing of the
underlying real estate, which results in a cash payment to the Trust or a cash
payment made to the Trust from surplus cash relative to the participation
feature. The Trust defers the recognition of Additional Loan interest payments
as income to the extent these interest payments are from escrows established
with the proceeds of the Additional Loan. When the properties underlying the
PIMIs generate sufficient cash flow to make the required Additional Loan
interest payments and the Additional Loan value is deemed collectible, the Trust
recognizes income as earned and commences amortizing deferred interest amounts
into income over the remaining estimated term of the Additional Loan. During
periods where mortgage loans are impaired the Trust suspends amortizing deferred
interest.
Impaired loans are those Additional Loans for which the Advisor believes the
collection of all amounts due in accordance with the contractual terms of the
loan agreement is not likely. Where necessary, impaired loans are measured based
on the fair value of the underlying collateral net of estimated selling costs.
The Trust measures impairment on these loans quarterly. Interest received on
impaired loans is generally applied against the loan principal.
Prepaid fees and expenses represent prepaid acquisition fees and expenses and
prepaid participation servicing fees paid for the acquisition and servicing of
PIMIs. The Trust amortizes prepaid acquisition fees and expenses using a method
that approximates the effective interest method over a period of ten to twelve
years, which represents the estimated life of the underlying mortgage. The
prepaid participation servicing fees are amortized using a method that
approximates the effective interest method over a ten-year period, beginning at
final endorsement of the loan if a HUD-insured loan and at closing if a Fannie
Mae loan. Upon the repayment of a PIMI, any unamortized acquisition fees and
expenses and unamortized participation servicing fees related to such loan are
expensed.
-9-
Results of Operations
The Trust's net income increased in the three months ended March 31, 2005 when
compared to the three months ended March 31, 2004 primarily due to an increase
in participation income. The increase was partially offset by a decrease in
basic interest on PIMs and PIMIs and an increase in expense reimbursements to
affiliates. Participation interest increased due to the Martin's Landing payoff
in March. Basic interest on PIMs and PIMIs decreased due to the Mill Pond II
payoff in December 2004. Expense reimbursements to affiliates increased due to a
change in the cost of services provided to the Trust in 2005.
Off Balance Sheet Arrangements
The Trust has no off balance sheet arrangements as described in Item
303(a)(4)(ii) of Regulation S-K and did not have any such arrangements during
the period covered by this report on Form 10-Q.
Contractual Obligations
The Trust has no contractual obligations as contemplated by Item 303(a)(5) of
Regulation S-K and did not have any such arrangements either during the period
covered by this report on Form 10-Q or during the Trust's most recent completed
fiscal year.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Assessment of Credit Risk
The Trust's investments in insured mortgages and MBS are guaranteed and/or
insured by Fannie Mae, FHLMC, the Government National Mortgage Association
("GNMA") and HUD, and therefore, the certainty of their cash flows and the risk
of material loss of the amounts invested depends on the creditworthiness of
these entities.
Fannie Mae is a federally chartered private corporation that guarantees
obligations originated under its programs. FHLMC is a federally chartered
corporation that guarantees obligations originated under its programs. These
obligations are not guaranteed by the U.S. Government or the Federal Home Loan
Bank Board. However, Fannie Mae and FHLMC are two of the largest corporations in
the United States, and both have significant experience in mortgage
securitizations. In addition, their MBS carry the highest credit rating given to
financial instruments. GNMA guarantees the full and timely payment of principal
and basic interest on the securities it issues, which represents interest in
pooled mortgages insured by HUD. Obligations insured by HUD, an agency of the
U.S. Government, are backed by the full faith and credit of the U.S. Government.
Collection of the principal and interest of the Additional Loans and interest on
the participation features have risks similar to those associated with higher
risk debt instruments, including: reliance on the owner's operating skills,
ability to maintain occupancy levels, control operating expenses, ability to
maintain the properties and obtain adequate insurance coverage. Operations also
may be affected by adverse changes in general economic conditions, local
conditions, and changes in governmental regulations, real estate zoning laws, or
tax laws; and other circumstances over which the Trust may have little or no
control.
On March 31, 2005, the Trust's investments also include cash and cash
equivalents of approximately $1 million of Agency paper, which is issued by
Government Sponsored Enterprises with a credit rating equal to the top rating
category of a nationally recognized statistical rating organization.
Interest Rate Risk
The Trust's primary market risk exposure is to interest rate risk, which can be
defined as the exposure of the Trust's net income, comprehensive income or
financial condition to adverse movements in interest rates. At March 31, 2005,
the Trust's remaining PIMI and MBS comprise the majority of the Trust's assets.
Decreases in interest rates may accelerate the prepayment of the Trust's
investments. Increases in interest rates may decrease the proceeds from a sale
of the MBS. The Trust does not utilize any derivatives or other instruments to
manage this risk as the Trust plans to hold all of its PIMI investment to
expected maturity. It is expected that substantially all of the MBS will prepay
over the same time period, mitigating any potential interest rate risk to the
disposition value of any remaining MBS.
The Trust monitors prepayments and considers prepayment trends, as well as
dividend requirements of the Trust, when setting regular dividend policy. For
MBS, the fund forecasts prepayments based on trends in similar securities as
reported by statistical reporting entities such as Bloomberg. For the remaining
PIMI, the Trust incorporates prepayment assumptions into planning as individual
properties notify the Trust of the intent to prepay or as they are scheduled to
mature.
-10-
Item 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
As of March 31, 2005, the Chief Executive Officer and the Chief Accounting
Officer carried out an evaluation of the effectiveness of the design and
operation of the Trust's disclosure controls and procedures. The Chief Executive
Officer and the Chief Accounting Officer concluded that the Trust's disclosure
controls and procedures were effective, as of the date of their evaluation, in
timely alerting them to material information relating to the Trust required to
be included in this Quarterly Report on Form 10-Q.
(b) Changes in Internal Controls
There were no significant changes in the Trust's internal controls or in other
factors that could significantly affect such internal controls subsequent to the
date of the evaluation described in paragraph (a) above.
-11-
KRUPP GOVERNMENT INCOME TRUST II
PART II - OTHER INFORMATION
--------------------------
Item 1. Legal Proceedings
None
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(31.1) Chief Executive Officer Certification pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
(31.2) Chief Accounting Officer Certification pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
(32.1) Chief Executive Officer Certification pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
(32.2) Chief Accounting Officer Certification pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
None
-12-
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Krupp Government Income Trust II
(Registrant)
BY: /s/ Wayne Zarozny
-----------------------------------------
Wayne Zarozny
Treasurer and Chief Accounting Officer of
Krupp Government Income Trust II.
Date: May 12, 2005
-13-